A Brief Guide on Anti-Money Laundering Transactions Monitoring

Anti-Money Laundering Transactions Monitoring is the process that screens customer transactions daily or for real-time risk events by banks and other financial institutions. 

 

From the analysis of this monitoring, financial institutions can paint a full picture of a customer profile, predict their future activities, create alerts, and provide suspicious activity reports. 

 

There are various Anti-Money Laundering (AML) Transaction Monitoring Solutions. Some solutions include profiling customers, blacklist screening, and sanctions screening. 

 

Every analysis from AML Transaction Monitoring Solutions is tailored toward meeting the requirements of anti-money laundering and counter-terrorist financing. 

 

How does Anti-Money Laundering Transaction Monitoring Solution Work? 

 

There are various ways AML transaction monitoring solutions work, and they include: 

 

  • It discovers suspicious behaviour and potential terrorist financing from customers’ end. 
  • It minimises alerts by modifying scenarios to fit each customer or based on transaction risk. 
  • It audits and carries out successful counter-terrorist financing monitoring and investigation. 

 

Why is Transaction Monitoring Important for Anti-Money Laundering? 

 

Technology keeps advancing daily, and criminals keep creating technologically advanced ways to carry out money laundering. Financial criminals can successfully commit financial crimes due to the existing gaps in the financial system. 

 

It is difficult for financial institutions to prevent these financial crimes, but organisations can monitor their customer’s activities and present suspicious activities to financial organisations as evidence. 

 

What Does Transaction Monitoring Detect? 

 

Translation Monitoring can detect the following: 

 

  • Money Laundering 
  • Terrorist Financing 
  • Fraud 
  • Drug Trafficking
  • Corruption 
  • Bribery 
  • Identity Theft 

 

How Does Money Laundering Work? 

 

Money laundering can usually occur via the following process:

 

  • Funnelling of illicit cash via associates cash-generating businesses. 
  • Inflating invoices in shell companies’ transactions. 
  • Using Layered funds to carry out various financial  investments 

 

What is the benefit of Transaction Monitoring? 

 

Transaction monitoring is a great way for companies to comply with the numerous Anti-Money Laundering regulations imposed to help reduce financial crimes in our society. 

 

It is also a great way to avoid sanctions, fines, and probing, which can lead to the closure of business operations in a country. 

 

Can Money Laundering Be Stopped? 

 

Stopping money laundering is a process that seems unachievable, but money laundering can be contained by increasing anti-money laundering transactions monitoring. 

 

Although it seems like money launderers never run out of money, effective AML transaction monitoring measures will help make their lives harder. 

 

Risk-based Approach and Anti-Money Laundering Transaction Monitoring 

 

Risk-based approach refers to financial institutions employing effective measures based on the level of risk a customer is. So, financial institutions can employ intensive measures for customers considered high-risk, and simple measures can be used for customers considered low-risk. 

 

For AML Transaction Monitoring to use a risk-based approach, financial institutions and countries must take appropriate measures to identify and analyse the risks of money laundering for each sector of the economy. 

 

Also, to employ a risk-based approach, there is a need to be aware that Anti-Money Laundering controls depend on various factors. 

 

Some of the factors that need to be considered: 

 

  • Nature and Complexity of financial institution’s business. 
  • Diversity of financial institution operations. Diversity may also include geographical diversity.
  • Financial institution’s customer product and activity profile.
  • Distribution channels employed and volume and size of transactions.
  • The extent of financial institutions dealing with the customer, Financial Institutions sometimes only deal with customers via third parties, intermediaries, and correspondents. 

 

Conclusion

 

Money Laundering contributes to 3% of global economic output, while ideally, 3% is a small amount; it is quite high for a financial crime to contribute that much to the economy. Hence, the benefits of anti-money laundering transaction monitoring cannot be overemphasised. 

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